Middle Class Squeeze: Key Pillars of Middle Class Security Rise by $10,600 As Incomes Stagnate

The middle class is facing an enormous economic squeeze, with the collective cost of child care, higher education, health care, housing, and retirement skyrocketing—even as incomes have stagnated or even fallen, a new report from the Center for American Progress shows. CAP’s analysis, “The Middle-Class Squeeze,” shows that for an example median income married couple with two children, the collective cost of these basic pillars of middle class security rose by an estimated $10,600 between 2000 and 2012. CAP’s report found that as a result of this middle-class squeeze, an example middle-class family had $5,500 less for basic necessities like groceries, clothing, and emergency savings by 2012, compared to 2000.

In the same time frame, incomes fell for median households and remained stagnant even for median married couples with two children, households that tend to have higher incomes. CAP’s research reveals that for an example median income middle-class family, acquiring middle-class security cost 30 percent more between 2000 and 2012, but they earned less than one percent more.

“While wages for Americans have stagnated, the cost of joining the middle class has skyrocketed, far outpacing overall consumer inflation. More and more, middle-class families have been running in place or even falling behind when it comes to affording quality child care, buying a home, or sending their children to college,” said Neera Tanden, President of the Center for American Progress. “This report should be a wakeup call for policymakers, for America’s companies, and for anyone who cares about the state of the economy. It’s impossible for America to increase demand and thereby build a robust economy until it addresses the dwindling budgets of middle-class families.”

The costs of the pillars of middle-class security are consuming a growing share of family budgets, leaving less and less room for discretionary spending and saving. Stagnating incomes and increasing costs have left families with less money to set aside for retirement, spelling even worse news for our country’s burgeoning retirement crisis.

To counter the middle-class squeeze, CAP offers recommendations for growing and strengthening the middle class on both sides of the squeeze: improving incomes and tackling costs for key pillars of middle class security such as child care, higher education, health care, housing, and retirement.

Read the Report: CAP’s Middle Class Squeeze report can be seen here.